Drawing Conclusions: Looking at Business Life Spans
Denver small businesses have a slightly below-average life expectancy
The Mile High City and much of Colorado may be booming, but Denver small businesses have a slightly below-average life expectancy of 4.9 years, according to research by the JPMorgan Chase Institute, released in July. The average lifespan of a U.S. small businesses is 5.3 years, according to the study, “Growth, Vitality and Cash Flows: High-Frequency Evidence from 1 Million Small Businesses.”
Of the roughly 20 markets cited in the report, Denver had the third- highest share of firms grown with “organic” or limited external financing (56 percent) and the lowest share of financed growth firms (1.6 percent).
Nationally, across the spectrum of 12 different industry sectors, the study found real estate firms lasting nine years and restaurants staying in business for 3.7 years before exiting. Across all business types, non-employer firms are five times more likely to exit the marketplace than they are to hire employees.
“While many people think of ‘gazelles’ and Silicon Valley startups as the keys to U.S. economic growth, self-financed small businesses that may never hire an employee or secure external financing make significant contributions to our economy and are the engine of the small business sector,” says Diana Farrell, president and CEO of JPMorgan Chase Institute.